China (Secretly) Loves TrumpDecember 2, 2016
by William P. Meyers

The defeat of TPP and triumph of One Belt, One Road

The Chinese are pretending to not like Donald Trump and his anti-Chinese policies. If he slaps import tariffs on Chinese goods, they certainly won't like that, and will scream about it, and find ways to retaliate. But that is all surface froth. In the deep currents, where the real money is, China is going to pull ahead of the United States much more easily than they thought was possible before the American people promoted Donald from The Apprentice to The President.

If you want to understand why, you have only to look at the TPP (Trans-Pacific Partnership); One Belt, One Road; and Chinese economic history.

In 1800 China was still the largest economy in the world, although the United Kingdom and Europe in general were coming on strong. By 1900 China was just a large, third world nation, a mere puppet of European powers, especially the Brits. A multitude of factors brought about the fall: cultural arrogance, poor government, corruption, an ossified business culture, and of course the predatory nature of the Brits, French, Germans, Russians, and even Japanese.

The Japanese built quite a few factories, mines, and railroads during their intervention in China, particularly in Manchuria. When World War II ended the communists took Manchuria and used it as a base to take over the rest of China. Just restoring order in China helped the economy, but Communist economics were designed for a developed country, not one where 98% of the people were peasants. In 1976 Mao died and after a few years a more pragmatic approach was taken. China is an economic rival of the U.S., Europe, and Japan.

U.S. capitalists and workers are a clever, hard-working lot, but we became the dominant world economic power, after an almost-full collapse called the Great Depression, by being the last major industrial power to enter World War II. At the end of the war everyone's factories had been bombed to smithereens except ours. Instead of recognizing that fact, then or now, Americans, high and low, believes we became the world's greatest economy because we are just an exceptionally industrious and virtuous people.

Now it looks like the U.S. economy is going to level off or degrade over time for a variety of reasons: cultural arrogance, poor government, corruption, an ossified business culture, too many stupid children of the rich in charge of things, etc.

Meanwhile, China, having done so well that it is no longer a place where labor is cheap (or land), continues to forge ahead under its "Communist" government. It does not always get the balance exactly right the first time, but it combines the advantages of socialism with the advantages of capitalism, something most American capitalists (and our ossified cultural establishment, and most of the Republican Party) can't comprehend.

One Belt, One Road (OBOR) is a program to tie China's economy to most of the rest of Eurasia and eastern Africa. It involves an infrastructure build that dwarfs anything that Trump is dreaming of, much less is capable of getting through a Republican Congress. It includes road and rail projects over land, and expanding the capacity of many seaports. It appears to be, at least potentially, the largest single economic project in the history of the world.

Trade is one of the critical components of economic success. On the other hand, tariff walls can also be critical components of economic success. From its inception until after World War II, the United States generally favored high tariffs to protect its industry and agriculture. After World War II (remember we were the only nation with intact factories) these tariffs became a hindrance. We wanted to sell the products of our factories, and high U.S. import tariffs just led other nations to retaliate. Many European colonies were in a process of revolting and wanted to set their own tariffs to protect their agriculture and industry. A consensus was reached that low tariffs were good for everyone; and on the whole that consensus held until recently.

Then along came two major league cheerleaders of people of shallow understanding, one for the right and one for the left, claiming that unemployment in America is caused by trade. And so the TPP won't be signed by the United States, and won't go into effect.

For the most part the twelve nations that were supposed to be signatories to the TPP are U.S. allies and are not part of the OBOR. The exception is Vietnam.

Donald Trump has threatened China, but by killing the TPP he is pushing the other TPP members into the Chinese camp. Australia, Chile, and Canada are major suppliers of commodities to China. Mexico should remain a U.S. ally, but given Trumps verbal attacks on Mexico, and on its economic integration with the United States through NAFTA, Mexico should be looking to China for trade. Recall that in 1800 China was Mexico's largest trading partner after Spain.

President Trump says he will get better trade deals for America, but it's going to require more than bribing a few local politicians to give him tax breaks and zoning exemptions, a game he is admittedly good at playing. Negotiations for the TPP began in 2008, and the agreement was not finalized until early 2016. This is not because trade bureaucrats are incompetent idiots. It is because trade agreements are complicated, and the more parties there are to them, the more complicated they get. Each country needed to know it was going to benefit, on the whole, from the deal. Every industry wanted to have a say, as did environmentalists and labor.

China's OBOR is a much simpler plan. Use China's prosperity to invest in other nations, particularly in infrastructure. There may be questions about who gets to build (and profit from) the port improvements, highways, and railroads, but every nation comes out ahead. It is not exactly the Marshall Plan, China is not donating this stuff, but it is making the capital available, rather than deploying it within China.

The Chinese play a subtle game. The best thing that could happen to them is Donald Trump "negotiating a better deal" with Japan, Taiwan, Philippines, Australia, Mexico ... Those "better deals" for the U.S. will be worse deals for our partners. They will encourage the partners to work with a more reliable nation, a nations willing to through its money around a bit, China.

The best we can hope for, other than Trump just plain changing his mind (he might be secretly pro-trade, but just wanted to use the Sanders message to undermine Clinton), is that his plans will simply bog down. The President has some power to act unilaterally, but mostly has to get each trade deal through Congress. After a few years of trying to persuade nations to make Trump greater while making their own people poorer, if Trump gets one trade deal negotiated with one nation during his term as President, and passed by Congress, that would be remarkable.